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Valued at a market cap of $260 billion, Shopify (TSX:SHOP) is among the many largest firms in Canada. The tech inventory went public in Might 2015 and has since returned 6,300% to shareholders. Over the past 12 months, SHOP inventory has returned practically 90%, outpacing broader market returns, because it has constantly overwhelmed earnings and income estimates.
Since historic returns don’t matter a lot to present or future traders, let’s look at whether or not Shopify inventory stays a great purchase right this moment.
How did Shopify carry out in Q2 of 2025?
Shopify inventory surged greater than 20% following its second-quarter (Q2) outcomes, which exceeded estimates. The Canadian e-commerce platform reported adjusted earnings of US$0.35 per share with income of US$2.68 billion. Analysts forecast income at US$2.55 billion with earnings of US$0.29 per share within the June quarter.
Notably, income progress accelerated to 31% 12 months over 12 months, up from roughly 20% within the prior 12 months interval. This acceleration underscores the corporate’s increasing market share and profitable execution throughout a number of progress initiatives.
Gross merchandise quantity (GMV) reached US$87.8 billion, representing 29% progress and exceeding Wall Road’s US$81.5 billion projection. Internet earnings jumped dramatically to US$906 million from US$171 million 12 months over 12 months, demonstrating the corporate’s bettering operational leverage.
CFO Jeff Hoffmeister famous that anticipated tariff impacts did not materialize, as gross sales originating from the U.S. accelerated in Q2. Whereas a number of Shopify retailers have raised costs, the platform hasn’t skilled demand destruction or drastic adjustments in cross-border transactions.
Shopify’s strategic investments in synthetic intelligence (AI) are gaining traction. Latest product launches embody an AI retailer builder and instruments to assist agentic commerce, which place the corporate on the forefront of conversational purchasing developments.
These improvements ought to make it enticing to bigger firms whereas sustaining its area of interest within the small- and medium-sized enterprise section.
Administration expects income progress of at the very least 25% in Q3, which is larger than the consensus progress estimate of 21.7%. Shopify ought to proceed to cut back its working bills and profit from economies of scale as it’s poised to realize traction in a number of worldwide markets.
Shopify has maintained flat headcount for 2 years whereas reaching 31% income progress. Hoffmeister additionally emphasised that Europe now accounts for roughly 25% of Shopify’s enterprise, and retailers on this area are outperforming native e-commerce progress charges by an element of 4.
This worldwide success stems from strategic product rollouts, together with the growth of funds to fifteen new European international locations and the launch of capital providers in Germany and the Netherlands.
Is Shopify inventory nonetheless undervalued?
Administration’s measured strategy to free money circulate margins, which optimizes for enterprise well being reasonably than maximizing profitability, positions Shopify to capitalize on a number of S-curve progress alternatives concurrently, thereby decreasing its dependency on any single income driver.
Analysts monitoring the TSX tech inventory forecast income to extend from US$8.88 billion in 2024 to US$24.5 billion in 2029, indicating an annual progress fee of twenty-two.5%. Throughout this era, adjusted earnings are forecast to extend from US$1.26 per share to US$3.10 per share, whereas free money circulate is anticipated to enhance from US$1.60 billion to US$5.34 billion.
At present, SHOP inventory trades at a ahead free money circulate a number of of 83.3 occasions, above the 12-month common of 73 occasions. If Shopify’s ahead FCF a number of normalizes to 40 occasions, which is affordable, it may return simply 15% over the following 4 years. It’s attainable that Shopify inventory could lag behind the broader market within the close to time period, given its lofty valuation.
